1. Field of the Invention
The present invention relates to a method and system for providing a deferred variable annuity contract with lifetime benefit payments; and more particularly, to a data processing method for administering a deferred variable annuity contract for a relevant life, the annuity contract having a payment base, a contract value, and a guarantee of lifetime benefit payments, wherein the lifetime benefit payment available for each period is equal to: (a Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base).
2. Description of the Prior Art
An immediate annuity is typically used to provide an income stream within a predetermined length of time from the date the premium is received. The amount of income can be either fixed or variable in nature and typically, these products do not provide an account value. A deferred annuity is typically used to provide accumulation and, potentially, a future stream of annuity income. The deferred annuity comprises an accumulation period during which the account value will vary with the underlying investments and an annuitization period where the client purchases an immediate annuity with the account value available. Deferred and immediate annuities typically provide guaranteed income for life, which transfers some portion or all of the risk of outliving one's accumulated assets to the insurer.
One basis for distinguishing commonly available deferred annuities is whether the annuity is classified as a “fixed annuity” or a “variable annuity”.
In a fixed annuity, the insurer guarantees a fixed rate of interest applicable to each annuity deposit. Therefore, a fixed annuity is desirable for those seeking a “safe” investment. The guaranteed interest rate may apply for a specified period of time, often one year or more. Often, a rate guaranteed for more than one year is called a “multi-year guarantee”. The rate credited on a fixed annuity is reset periodically, moving in an amount and a direction that correlate the yields available on fixed-income investments available to the insurer.
With a variable annuity, the annuity contract owner bears the investment risk. The relevant life typically has a choice of funds in which he/she can direct where the annuity deposits will be invested. The various funds or sub-accounts may include stocks, bonds, money market instruments, mutual funds, and the like.
Variable annuity contracts typically provide a death benefit. Oftentimes during the accumulation period, the death benefit is related to the contract value. That is, if the sub-accounts backing the contract value have performed poorly, then the death benefit may be reduced to an insignificant amount. After annuitization, the death benefit can be a function of the remaining payments of the annuity at the time of the relevant life's death. Further, if the annuity contract does not provide a guarantee (discussed below), the contract will terminate when the contract value goes to zero or some other amount specified in the contract or rider.
Annuity contracts may also provide guarantees in several different variations. A Guaranteed Minimum Death Benefit (GMDB) is a guarantee that provides a minimum benefit at the death of the relevant life regardless of the performance of the underlying investments. A Guaranteed Minimum Income Benefit (GMIB) is a guarantee that will provide a specified income amount at the time the contract is annuitized. The income payment will be dependent on previously stated details set out in the contract. A Guaranteed Minimum Accumulation Benefit (GMAB) is a benefit that guarantees a specified contract value at a certain date in the future, even if actual investment performance of the contract is less than the guaranteed amount. A Guaranteed Minimum Withdrawal Benefit (GMWB) is a guarantee of income for a specified period of time, and in some versions, the income stream is guaranteed for life without requiring annuitization as in the guaranteed minimum income benefit. However, this guarantee will automatically annuitize the contract if the contract value is reduced to zero or some other amount specified in the contract or rider.
Most deferred variable annuity products in the prior art typically determine the amount of the yearly lifetime benefit payments, if any, to be a predetermined percentage (withdrawal percent) of a withdrawal base. The withdrawal base amount is typically set at the time of the first lifetime benefit payment and is fixed for the remainder of the term of the annuity product. Further, the withdrawal percent is typically fixed after the first lifetime benefit payment is requested, or alternatively the withdrawal percent varies slightly for the remainder of the term of the annuity product. However, the actual number of years since the purchase date of the annuity contract is typically not taken into consideration when determining the respective withdrawal percents.
Many financial products and systems have been disclosed. These include: information relevant to financial products having a future benefit conditioned on life expectancies of both an insured and a beneficiary; a post employment qualified health care benefit plan funded during a covered person's working years to covered persons under the plan, a retirement plan funded with a variable life insurance policy and/or a variable annuity policy; a benefit plan providing systematic withdrawal payments during a liquidity period and annuity payments when the systematic withdrawal payments cease, and financial instruments providing a guaranteed growth rate and a guarantee of lifetime payments.
Each one of these prior art references suffers from at least the following disadvantage(s): the relevant life does not have the flexibility to be able to choose to defer payments upon eligibility in order to receive a deferral bonus added onto the original payment for each subsequent year.
Accordingly, there remains a need in the art for a data processing method for administering a deferred annuity contract for a relevant life wherein the annuity contract contains lifetime benefit payments, wherein the relevant life has the flexibility to be able to choose to defer payments in order to receive bonuses in addition to the payments received for each subsequent year. Furthermore, the lifetime benefit payment for each period is determined by the following formula:LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),                wherein the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment.        